FORT MCMURRAY, Alberta (miningweekly.com) – Since the November 2012 discovery of a new high-grade uranium deposit just outside the south-western corner of Saskatchewan’s famed Athabasca basin, where the world’s highest-grade uranium mines are found, explorer Fission Uranium has succeeded in stringing together new uranium discoveries “like pearls on a necklace”.
The TSX-listed company’s Patterson Lake South (PLS) project now stretches some 3.17 km over an east-to-west strike length, in five separated mineralised zones, which sparked a staking rush in the area soon after the first discovery was revealed, in an area initially thought to host coal, not high-grade uranium mineralisation.
“This is a typical setting for high-grade uranium deposits and they occur in long sinuous occurrences that pinch shut, before opening up again,” Fission president, COO and chief geologist Ross McElroy told Mining Weekly Online during a recent sponsored project site visit (see attached video).
PROJECT FOR THE TIMES
Fission chairperson and CEO Dev Randhawa noted that, with a preliminary economic assessment (PEA) on the project’s Triple R deposit in hand, PLS is ideally positioned to enter production around 2025, when demand is expected to spike on the back of significant nuclear reactor build-out plans across the globe, especially in China.
Randhawa, the longest-running CEO in the Canadian uranium business, said power utilities are currently not contracting future supplies, but adopting a ‘wait-and-see’ approach and taking advantage of low spot prices that are hovering around the $20/lb mark.
He pointed to the fact that, currently, nearly 60% of the global uranium supplies come from politically unstable sources, with Kazakhstan, Russia, the Czech Republic and Ukraine accounting for about 51.7% of the market.
Randhawa pointed out that, globally and in the US, about 20% of electricity is generated from nuclear reactors, however, that means about half of the radioactive metal is sourced from Russia-controlled sources.
“While there are about 60 new nuclear reactors currently being built, no new mines are under construction. Nearly one-billion pounds of uranium pentoxide [will be] uncovered in the next eight years but, owing to a supply glut, production is still being cut,” he explained.
While large producers such as Cameco have shuttered several mines in the wake of falling prices, with the largest uranium producer, Kazakhstan-based Kazatomprom, announcing a more-than-10% cut in output earlier this year, the outlook for uranium remains uncertain.
Impacted by a supply glut, and the slow reactivation of nuclear reactors in Japan following the 2011 incident at the Fukushima Daiichi plant, it will take about two years for these mothballed mines to restart once prices recover, exposing utilities to risk higher contracting prices if they wait longer to enter deals.
“Pressure is growing to return to contracting, as a lack of long-term contracting leaves utilities exposed,” said Randhawa.
For contracting to return, prices will have to rise, but the longer the wait, the stronger the upwards pressure on pricing, as shown in 2006 and 2007, when near-historic volumes of uranium were sold under contract, at a time when prices rocketed to record highs around $140/lb.
Despite the uncovered requirements not being expected to ramp up significantly in the near term, the current price-sensitive sentiment is expected to give way to increasing utility concerns about the security of future supply. That uncertainty creates an opportunity for producers who can weather current weak market conditions, or enter the market at a low cost point.
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